•The Japanese economy shrank 0.7% year-on-year (YoY) in the third quarter of 2011, following a 1.7% YoY decline in the second quarter.
•According to the preliminary estimate by the Cabinet Office of Japan, GDP declined 1% YoY in the last quarter of 2011, resulting in a 0.9% decline in 2011.
•Japan’s exports rose 7% to US$822 billion in 2011, while imports surged 23% to US$853 billion. Japan posted a trade deficit of US$31 billion, the first in a decade.
•Japan’s industrial production shrank 3.5% in 2011, compared to the 16.4% growth in 2010.
•Japan's consumer price index (CPI) shrank 0.3% in 2011, after deflation of 0.7% in 2010.
•Japan is Hong Kong’s third largest export market and its second largest source of imports. In 2011, Hong Kong’s total exports to Japan grew 5.9% to US$17 billion and imports from Japan gained 3.4% to US$47 billion.
•Hong Kong is the largest export destination for Japanese food and live animal products. In 2011, Japan’s exports of food and live animal products to Hong Kong amounted to US$971, accounting for 25.5% of Japan’s export under such category.
Current Economic Situation
Japan’s economy posted a 0.7% YoY decline in the third quarter of 2011, following a 1.7% decline in the second quarter of 2011. According to the preliminary estimate by the Cabinet Office of Japan, the economy shrank 1% YoY in the final quarter of 2011, positing an annual growth of -0.9% in 2011. The contraction in Japan’s economy in the year reflected the negative impacts of the Great East Japan Earthquake in March 2011, which affected both industrial production and domestic demand.
Given the disruption of production, Japan’s industrial output was greatly affected, especially in the initial months, with 3.5% decline in 2011. Thanks to the appreciation of Japanese yen, the country’s export value in term of US dollar recorded a positive growth rate of 7% in 2011, though slower than 33% growth in 2010. In term of Japanese yen, the export value registered a 2.7% decline. Electronics and electrical machinery, which accounted for 18% of Japan’s exports, fell 8.3% in 2011. Exports of automobile and transportation equipment, accounting for 21% of total, declined 8% in 2011. On the contrary, machinery, representing 21% of exports, gained 3.7% during the same period.
Japan's consumer price index (CPI) shrank 0.3% in 2011, after a deflation of 0.7% in 2010. Retail sales also recorded a decline of 1.2% during the year, compared to a 2.5% growth in 2010, reflecting the deteriorating domestic demand. Jobless rate stood at 4.5% in 2011, down from 5.1% in 2010.
Japan in the Global Manufacturing Supply Chain
Japan is a major supplier of electronics parts and components, accounting for about 20% of the global supply of semiconductors. For specific items, the share could be even higher. For example, Japan supplied over 40% of the worldwide NAND flash memory used in many laptops, smartphones and iPad. More than 40% of the microcontroller chips used in cars were produced in Japan, while 60% of the global supply of airflow sensors were Japan-made. Furthermore, Japan supplied about 90% of the BT resin used in making printed circuit boards (PCB).
With Japanese manufacturers struggling with parts shortage and power outages, Japan’s supply chain problems were spreading to the US, Europe and other countries in Asia in the initial weeks after the earthquake, with their productions slowed or interrupted.
In September 2011, it was reported that most manufacturers had resumed the full production. Nonetheless, thanks to the availability of alternative supplies, both domestically and overseas, Japan’s supply chains on balance are on the mend and the impact on the global supply chain is expected to steadily improve in upcoming months.
Trade Policy and Development
Most goods can be freely imported without import licences, except certain items covered by the Import Restriction System (e.g. chemical products and weapons). Most of the Hong Kong exports, such as garments, toys, jewellery, houseware, watches, clocks and the majority of electronic items are not subject to import restrictions.
Japan's tariff schedule has four columns of applicable rates: general, WTO, preferential, and temporary. Goods originating from Hong Kong are charged WTO rates unless a lesser "temporary" rate exists. Japan's Generalised System of Preferences (GSP) grants lower or duty-free rates to products imported from developing countries. Hong Kong fully graduated from Japan's GSP in February 2000.
Japan has signed bilateral free trade agreements (FTAs) and economic partnership agreements with Chile, India, Mexico, Peru and Switzerland, and its agreement on comprehensive economic partnership with ASEAN went into force in December 2008. Beside, Japan has embarked on negotiations of FTAs with several economies, including Australia, South Korea and Gulf Cooperation Council (GCC).
Japan - Economic Outlook
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